Archive for August, 2006
Thu 31 August 06 · Filed under Fraud News Stories
Merge Technologies Inc. disclosed in its 2005 financial statement filings with the SEC that company executives had bypassed internal controls over the accounting function in order to inappropriately increase revenue and profits since 2002. Correcting these irregularities decreases the company’s profits for those years.
Experts are a bit surprised that the company is admitting to the potentially illegal conduct. The SEC is conducting an informal inquiry into Merge’s accounting practices, and this admission could lead to the SEC elevating it to a formal inquiry.
Merge Technologies does business as Merge Healthcare, and the company develops software for diagnostic imaging centers, manufacturers of medical imaging equipments, and some hospitals.
Problems with the financial statements came to light shortly after a June 2005 purchase of Cedara Software Corp, which more than doubled Merge’s size.
The restated figures are:
2005 - Revenue $82.6 million; Net loss $2.7 million
2004 - Revenue $26.3 million (decrease of over $10 million); Net income $2.2 million (decrease of over $5 million)
2002 through 2003: Revenue decrease of over $6 million; Net income decrease of $3 million
Tags: internal controls, irregularities
Wed 30 August 06 · Filed under Uncategorized
Welcome to this week’s edition of the Carnival of the Badger, with your friendly hostess Tracy Coenen of Sequence Inc Forensic Accounting. The Carnival of the Badger is a weekly event, featuring posts from bloggers throughout Wisconsin.
Since this blog is devoted to all things “fraud”, I’ve decided to put a scammy, fraudulent spin on this week’s carnival.
Our world is filled with frauds and scams. Groups dedicated to terrorism are frauds in and of themselves, and they aren’t interested in playing by any rules except their own. Governments commit fraud upon the taxpayers every time they waste the hard earned money of taxpayers. There’s a $122 billion scam being perpetrated upon American taxpayers, and what do we have to show for it? (I’ll let you know in a few weeks, as I’ve been invited to New Orleans for a few days!)
Fraud upon the taxpayers is a particular problem in Wisconsin, but it seems that the tax burden just hasn’t hit Madison as hard as other cities. At least Milwaukeeans can drown their sorrows in some beer!
*** Alert! Alert! The mooonbats are coming, the moonbats are coming! Now back to our regularly scheduled programming. ***
All you television junkies should know that Turner Broadcasting is ruining the legendary Tom & Jerry cartoons. Eventually, though, you have to turn off the television and go to work. You might try to do a good job, or you might not. What was today’s topic? I forgot. Oh yeah, fraud.
Well, it’s time to wrap up this Carnival of the Badger with a couple of scandals. We all knew this was coming, didn’t we? And what would a post dedicated to fraud be without a mention of the Milwaukee Public Museum?
If you like blogging (or reading) about fraud and scams, check out the new Carnival of Fraud, being run and hosted by yours truly every Monday.
Join us next week, when the Carnival of the Badger will be hosted by a yet unnamed blog.
Wed 30 August 06 · Filed under Uncategorized
Warren Jeffs, a known polygamist and fugutive, was caught this week after the Cadillac Escalade in which he was riding was pulled over by the Nevada Highway Patrol.
The trooper who pulled over the vehicle said something didn’t seem right as soon as he approached the vehicle. The FBI arrived on the scene and found 3 wigs, 15 cell phones, letters to “President Warren Jeffs,” $54,000 in cash and $10,000 in gift cards.
Isaac Jeffs, Warren’s brother, was driving the vehicle and one of Warren’s many wives was with him.
Jeffs is the head of the Fundamentalist Church of Jesus Christ of Latter Day Saints, which has 10,000 members. The church split from the Mormon Church when the Mormons stopped endorsing the practice of polygamy over 100 years ago.
Jeffs has been running the sect since 2002, when his father died. He has been on the FBI’s Ten Most Wanted list since May for sex crimes that include arranging marriages between underage girls and adult men.
Sources close to the church say that it is likely that nothing will change for the church members
Tue 29 August 06 · Filed under Fraud Detection & Prevention
Back in January of this year, County Board Supervisor James White suggested that the Milwaukee Public Museum be subjected to the scrutiny of a forensic audit. The museum’s coffers had been emptied by incompetent and possibly corrupt employees.
At that time, Assistant District Attorney David Feiss claimed that he was conducting an investigation of his own that would be quickly wrapped up. He said within a month. Here we are, seven months later with no results from him or the Milwaukee District Attorney’s office.
The Milwaukee Journal Sentinel reports that the investigation is close to concluding, and that the district attorney’s office is examining whether or not felonies were committed when money was transferred out of the museum’s endowment fund. Millions of dollars from the endowment fund were used for museum operations, in violation of the museum’s policy.
The former chief financial officer, Terry Gauoette initiated withdrawals from the fund without getting proper authorization. The former president of the museum, Michael Stafford, said he didn’t know of the withdrawals until several months after they started.
Milwaukee County auditors took a look at the museum’s finances and issued a report that essentially said that they spent a lot of money and withdrew funds from the endowment without authorization. The report did highlight the cover-up by museum executives.
Feiss says that no money was “stolen”. His office says they are investigating whether records related to the endowment fund were falsified or if transfers were made without proper consent.
I still wonder why the Milwaukee County Board saw fit to not fund a real investigation. It seems that no one has really looked into WHO received all these funds that the museum was spending.
- Were the funds spent for legitimate products and services?
- In arms-length transactions?
- Or to people who had close ties to museum executives?
- Were the products and services needed?
- Were products and services actually provided?
- Were they provided at market rates or above-market rates?
Tags: forensic audit, investigation
Mon 28 August 06 · Filed under Fraud News Stories
Former Milwaukee police officer Jon Bartlett has been sentenced to 4 1/2 years in prison following his convictions on felony charges related to bail jumping and threatening to blow up the police station where he used to work.
Judge David Hansher called Bartlett a “menace to society” and followed his prison time with 5 years of probation and a $10,000 fine. Hansher said to Bartlett, “I find you are a ticking time bomb about to explode at any minute.”
Barlett is currently being held by federal officials on charges of trying to buy two firearms, which is prohibited for anyone charged with a felony. He also faces state charges of substanial battery in the Frank Jude Jr. beating case, as there was a hung jury on those charges earlier this year. He also faces potential federal charges in the Jude case.
Jon Bartlett spent 5 years on the Milwaukee police force before being fired on May 24, 2005 for participating in the Frank Jude beating. Eight other off-duty officers were also fired for their part in the Jude case. Bartlett was still receiving his paycheck (even though fired) under state law, and has been paid about $97,000 under this law. That will end as of today, due to his felony conviction.
Tags: police officer, felony, bail jumping, probation
Sun 27 August 06 · Filed under Fraud News Stories
When asked by CBS (60 Minutes) why New Orleans couldn’t be cleaned up sooner following Hurricane Katrina, mayor Ray Nagin said:
“You guys in New York can.t get a hole in the ground fixed and it.s five years later. So let.s be fair.”
Tags: New Orleans, Hurricane Katrina, Ray Nagin
Sun 27 August 06 · Filed under Fraud News Stories
The United States Department of Justice, the Securities and Exchange Commission, the National Association of Securities Dealers and the New York Stock Exchange, are expected to announce a civil settlement with Prudential Financial Inc. on Monday. This will settle claims that brokers in the company’s securities unit assisted investors to rapidly trade mutual fund shares (known as market timing).
Five former Prudential Securities brokers and their branch manager in Boston were accused of assisting sophisticated investors to market time trades of mutual funds, with profits over $1.3 billion. Action is taken in cases like this because rapid trading tends to raise expenses and lower profits for long-term shareholders in a fund.
The settlement of about $600 million will be one of the biggest in the broad investigation of market timing, and will help the company avoid criminal prosecution. Prior to the Prudential settlement, total settlements of $3.5 billion were reached in the market timing scandal.
Tags: Prudential, market timing, investigation, prosecution
Fri 25 August 06 · Filed under Fraud News Stories
ABC News is reporting that State Farm Insurance supervisors demanded that hurricane damage reports be altered so that the company would not have to pay claims.
Kerri Rigsby and Cori Rigsby were independent adjusters working exclusively for State Farm for eight years. They say that they’ve turned over documents to the FBI and Mississippi investigators relative to their claims of corruption within the company.
The sisters say that they saw large scale fraud in the Biloxi and Gulfport field offices, and they believe that a large shredding truck brought in by the company was used to destroy documents related to Hurricane Katrina. The sisters also say that supervisors were pressuring adjusters and consultants to attribute hurricane damage to water, rather than wind, so that claims would not have to be paid. Under the State Farm policies, water damage is not covered, but wind damage is.
State Farm says they have started an internal investigation into the matter.
Tags: State Farm Insurance, independent adjusters, corruption, fraud, internal investigation
Thu 24 August 06 · Filed under Fraud News Stories
If you blog about fraud, white collar crime, or scams in general, you might be interested in participating in my new Blog Carnival, the Carnival of Fraud.
What is a Blog Carnival, you say? A carnival happens when someone takes the time to find really good blog posts on a given topic, and then puts links to all those posts together in a blog post called a “carnival”. The carnivals all have different styles. Some are creative and attempt to tell a story, while others do a straightforward listing of the week’s participants.
Think of a carnival as a magazine of sorts, focusing on blog posts that are related to a specific topic. Carnivals can put you in touch with experts on various topics, or just be an interesting read for many.
The Carnival of Fraud is described as:
The Carnival of Fraud is open to anyone who has blogged about business fraud, consumer scams, employee theft, white collar crime, or other fraud-related topics.
The first edition will be published on September 4th, right here at the Fraudfiles Blog. You can submit your posts for inclusion in the Carnival of Fraud anytime between now and then.
Tags: blog, fraud, white collar crime, scams, Blog Carnival, Carnival of Fraud, consumer scams, employee theft
Wed 23 August 06 · Filed under Entertainment
Paramount Pictures, the movie studio of parent Viacom Inc., announced that it would end its fourteen-year relationship with Tom Cruise after controversial and unusual public behavior that the studio believes has negatively affected movie revenues.
Sumner Redstone, chairman of Viacom said that Cruise’s unusual behavior and constant promotion of personal causes (such as the church of Scientology and his criticism of Brooke Shields for using medication to help with postpartum depression) have had a negative effect on ticket sales for movies such as “Mission: Impossible III” (supposedly costing the company between $100 million and $150 million on that movie alone).
Redstone is quoted as saying, “As much as we like him personally, we thought it was wrong to renew his deal. His recent conduct has not been acceptable to Paramount.”
The result of this announcement will be that Paramount will not renew the deal with Cruise/Wagner Productions, the company owned by Cruise and Paula Wagner. This deal most recently paid Cruise/Wagner about $10 million annually to develop films in conjunction with Paramount. In addition, Cruise had also been paid 20% of box-office revenue from his movies and a large portion of DVD sales.
Cruise’s representatives say that the real story is that Cruise/Wagner has decided to set up an indepedent company that will be finance by two unnamed hedge funds.
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